Newsletter Archive · Issue No. 3
The Middle Chapter
Issue No. 3 · August 2026
Financial thinking for your most important decades.
Every parent I work with wants to pay for their child’s college. It is one of the most consistent things I see across clients, regardless of income, net worth, or how close they are to retirement. The instinct to fund your child’s education fully is powerful. It is also, in many cases, financially at odds with the most important thing you can do for your own future.
This month I want to talk about how to think through that tension honestly and what a real plan for both actually looks like.
— Adam
You can borrow for college. You can’t borrow for retirement.
There is a line I use with clients that tends to stop the conversation: you can borrow for college. You cannot borrow for retirement. It sounds obvious when you hear it. But most families do not act like it is true.
Four years at a private university now costs upward of $260,000 when you include tuition, room, board, and fees. At an out-of-state public school the number runs close to $200,000. Even in-state, you are looking at over $120,000. Those numbers are real and they are terrifying and they make the instinct to start saving early and save aggressively feel like the responsible thing to do. The problem is that aggressively funding a 529 while undercontributing to retirement is not a plan. It is a tradeoff that tends to look fine in the near term and painful later.
Source: College Board, Trends in College Pricing and Student Aid, 2025.
“Your children have decades to repay student loans. You have a fixed window to fund your retirement. That asymmetry should drive the sequencing decision.” |
The compounding cost of getting the sequence wrong
A dollar contributed to a 401(k) at age 45 has roughly 20 years to compound before a typical retirement age. A dollar redirected to a 529 instead does not disappear. It funds a real expense. But it also does not compound in a tax-advantaged retirement account for the next two decades. That opportunity cost is significant and it is permanent. You cannot go back and make up the retirement contributions you skipped.
The math argues strongly for sequencing: fund retirement first, then fund college with what remains. Most parents know this. Most don’t act on it. According to Fidelity’s 2024 College Savings Indicator Study, college tops parents’ saving priorities, ahead of both retirement and emergency savings. More than 40 percent of parents say they are saving less for retirement specifically because they are also saving for college. The emotional pull of paying for a child’s education is stronger than an abstract opportunity cost calculation.
What most families miss about financial aid
Here is something that surprises most people: retirement accounts are generally not counted as assets in the federal financial aid formula. A 401(k) or IRA balance does not show up on the FAFSA. Neither does home equity in your primary residence. What does count, beyond income, are taxable investment accounts, savings, and 529 balances.
This means the composition of your balance sheet matters as much as the size of it. A family with $300,000 in a taxable brokerage account and $300,000 in home equity is not in the same aid position as a family with the same net worth held entirely in retirement accounts and home equity. The family that prioritized retirement savings may actually end up with better aid eligibility. Not just more retirement security.
There is a broader point here. Aggressively funding a 529 while undercontributing to retirement does not just cost you in compounding. It can reduce the financial aid your child is eligible to receive. The conventional wisdom about saving as much as possible in a 529 is not always the right answer. Where the money sits also matters.
What good sequencing actually looks like
There is no universal answer, but the framework is straightforward. Retirement savings come first, funded to a level that reflects where you actually want to land. For most people in their peak earning years, that means contributing aggressively to tax-advantaged accounts before directing meaningful dollars toward college.
It is also worth remembering that a well-funded retirement gives you options. If your children graduate with student loan debt, you can choose to help pay it down later. That flexibility only exists if you prioritized your own financial security first. A parent who underfunds retirement to pay for college may find themselves unable to help their children, or relying on them, later in life.
The college vs. retirement question is not really a question about college or retirement. It is a question about whether you have a plan that accounts for both. Most families try to solve it in isolation. A 529 here, a 401(k) there. Without ever stepping back to look at the full picture. A comprehensive financial plan is what makes it possible to fund both intelligently, sequence the decisions correctly, and avoid the tradeoffs that seem inevitable when you are figuring it out as you go.
Worth thinking about Most families think about college savings as a separate bucket from retirement savings. They are not separate. Every dollar that goes into a 529 instead of a 401(k) is a retirement decision disguised as an education decision. |
 | Adam Runyan Managing Director & CIO |